THQ Wins Approval of Bankruptcy Loan While It Seeks Sale

By Michael Bathon -
Dec 20, 2012

THQ Inc. (THQI), maker of the “Saints
Row” and “Company of Heroes” video-game franchises, won court
approval of a bankruptcy loan to help fund operations as it
pursues a sale of virtually all its assets.

U.S. Bankruptcy Judge Mary F. Walrath granted THQ interim
approval to borrow as much as $6.5 million at a hearing today in
Wilmington, Delaware. Walrath scheduled a Jan. 4 hearing to
consider approving the full amount of the loan, as much as
$37.5 million, and the company’s proposed sale process.

THQ reached an agreement before filing for bankruptcy to
sell its assets to Clearlake Capital Group LP in a deal valued
at about $60 million. The company wants the court to approve
guidelines for a Jan. 9 auction, which would require potential
buyers to submit bids by Jan. 8, followed by a Jan. 10 hearing
to approve the sale, according to court documents.

Walrath said she wants more details and possibly testimony
to support the game-maker’s aggressive sale timeframe.

“Management and Clearlake want to ram this sale through”
under a process that wouldn’t afford potential bidders enough
time to seriously evaluate the assets, said Paul N. Silverstein,
a lawyer representing noteholders.

Jeffrey C. Krause, THQ attorney, said that while the
timeframe is “very truncated” and “not ideal” during the
holiday season, the alternative would be a Chapter 7 liquidation
because the company would run out of money by mid-January. “We
will liquidate because we don’t have an option,” Krause told
Walrath.

UDraw Losses

THQ listed assets of $204.8 million and debt of
$248.1 million in Chapter 11 documents filed yesterday. The
company said it was forced to seek court protection after
sustaining losses for the past five fiscal years.

Recent losses were tied to its “uDraw” peripheral device
for the Nintendo Wii, Sony PlayStation 3 and Microsoft Xbox 360
gaming consoles, which let users bring their drawings to life on
their television screens. While the uDraw had early success on
the Wii, the PlayStation and Xbox versions “fell far short of
expectations,” according to court papers.

“Saints Row,” with more than 11 million units shipped
globally, is THQ’s most-successful franchise, according to a May
press release. THQ also published the “Darksiders” and “Red
Faction” franchises, according to its website.

The video-game maker said it required more time for some
titles and had to delay the March introductions of “South Park:
The Stick of Truth,” based on the popular adult cartoon show
from Matt Stone and Trey Parker; “Company of Heroes 2” and
“Metro: Last Light.”